This paper analyzes dynamic movement of outputs and market clearing wh
en mutually interdependent economies trade. The equilibrium evolution
of stocks admit the possibility of monotonic or cyclical behavior, eve
n in the long run. However, the prices eventually reach a steady state
but may exhibit monotonic or oscillating behavior in the short run. A
lso I show that higher consumption per unit of stock is associated wit
h lower productivity or negative externalities. A stronger preference
for the foreign good increases or decreases consumption, depending whe
ther the externality is negative or positive.